A closing date is like a term paper deadline: you need to meet it. But life happens, and sometimes you need an extension.
In fact, about 1 in 4 closings experience delays, according to the National Association of Realtors (NAR).
The good news? These delays didn’t derail deals entirely because buyers and sellers have the option to communicate and compromise. Here, we’ll lay out how to convey why you need a little more time — whether it’s a titling or deed issue, a family emergency, a natural disaster, a holiday, or some other matter — so that your purchase stays on track.
Setting the closing date
At closing, the house becomes yours, but you’ll need patience between making an offer and getting the keys. The average time to close on a house in September 2019 was 43 days, according to data from Ellie Mae.
A seller will specify a date based on when they’re able to take possession of a new home, or (more often than not) a buyer’s mortgage lender determines the date based on how long it needs to process the loan.
Most parties schedule the closing date for 30 to 45 days after agreeing upon an offer to give the lender enough time to review your financial history and underwrite the mortgage. If you pay cash, you and the seller can arrange for a faster closing while allowing enough time for a home inspection and any needed repairs.
Are you covered by a contract contingency?
Buyers and sellers often have to meet certain contingencies, or conditions that make the contract binding. Contingencies protect you as a buyer from surprises that crop up before closing.
Standard contingencies cover you in the event that the appraisal comes in under contract value, the inspection identifies major issues with the home, or if something happens with your financing. In each of these scenarios, penciling contingencies into the contract gives you the ability to walk away from the deal and keep your earnest money.
More often than not, though, sellers and buyers are able to negotiate through each closing milestone and come to an agreement, even if it’s later than expected. (NAR data shows that typically only 2%–4% of settlements are typically cancelled during any given quarter.)
However, steps like the inspection, appraisal, and title search can and do cause delays. If you communicate with the seller and stay on the same page about pushing back the deadline, however, you’ll likely be able to keep the deal moving forward.
You need an extension for financial or personal reasons. Now what?
Some contracts build in leeway around closing with phrases such as “on or about” a particular date while others allow for a “reasonable” extension of 10 to 30 days, depending on the circumstances.
Either way, if you need more time to get your part of the deal in order, first document the reason for the delay to substantiate your interest and show you’re conscientious, said Marcus Vanzant, a top-performing Bradenton, Florida, agent.
“It’s really just about full disclosure: ‘This is the reason why. If you could work with us, we would really appreciate that.’ And just coming from a good, humble spot,” he said.
Your agent also might have run into a particular issue in the past and be able to advocate for you. For instance, Vanzant said he and seller’s agents have agreed to extend closing dates by roughly a week when dealing with certain lenders they know are slow about approval.
Can moving the closing date cost me?
Moving a closing date past the end of one month and into the next could mean you’ll pay more daily interest charges, depending on your loan product. Your purchase agreement also may state that a buyer who misses the original closing date must pay the seller a penalty, such as a flat fee or a daily charge for each day past the original closing date, compensating the seller for additional tax, insurance, and mortgage payments in the interim.
However, a seller could agree to a short extension without a penalty because of all the different parties involved in this process. (If there’s a cloud on the title, or a lender requires hazard insurance, for instance, a seller may not fault the buyer for this.)
Vanzant said he’s found that sellers are much more agreeable in terms of delays when they know what to expect and are sympathetic to a particular buyer’s situation.
“It’s not always ‘squeaky wheel gets the grease,’” he said. “It’s being a good buyer throughout the process, being kind, being reasonable through the repairs, all those kinds of things. Then when we have to ask for a favor, there’s more opportunity to get that favor.”
Keep your closing on track: Get your finances in order ahead of time
Financing issues were the top reason for contracts with delayed settlements from July to September 2019, affecting 36% of transactions, although there were some personal reasons in the mix as well, such as the buyer losing a job (affecting 1%).
Although some delays are out of your hands, such as the health and safety repairs that FHA, VA, and USDA home loans require, you can do your part to guard against pushing back the closing date by planning ahead for the mortgage process and credit check.
1. Work with a lender to get pre-approved for a mortgage (or better yet, a pre-approval with a full financial underwrite)
Before you head into your property search, meet with a lender to confirm that you’d qualify for a mortgage and, if so, how big of a loan you qualify for based on your finances. Note that there are different levels of financial evaluation a lender can provide.
To obtain pre-qualification, for instance, a lender will ask you questions about relevant factors like your income, savings, and credit without verifying anything. However, you’ll be in a more competitive position if you opt to get the more robust mortgage pre-approval, for which the lender actually verifies at least some of your financial information.
Finding a lender that will underwrite and verify a lot of your information up-front will call for a little legwork on your end. To prepare for the pre-approval process, gather up any financial documents you’ll likely need to show the lender, such as:
- W-2s and tax returns for the past two years
- Pay stubs for the last 30 days
- Bank statements for the last 60 days
- 1099 forms (if you’re self-employed)
- Documented dividends, stock earnings, and other income sources
If you’re looking to put forward a very strong offer, HomeLight Home Loans offers a Conditional Approval, which is a pre-approval with a full financial underwrite. We’ll evaluate all the puzzle pieces that impact your financial picture and tell you exactly how much you qualify for before you start making offers, rather than waiting until the end like many lenders do.
This shows sellers that your financing is likely to come through and gives you more certainty as a buyer. Bottom line: Getting your financing lined up ahead of time reduces the chances you’ll need to push back the closing date because of your own mortgage issues (though note that even a fully underwritten pre-approval is not a commitment to lend).
2. Don’t do anything to alter your financials during your application period
You can’t control you or your partner losing a job, but don’t change jobs of your own accord while applying for a mortgage. Also don’t buy a car, apply for credit, or take on other obligations that could mess with your application, the underwriting process, or a lender clearing your loan to close and issuing your Closing Disclosure (issued according to the Know Before You Owe mortgage disclosure rule), which requires lenders to give borrowers a detailed loan rundown three days before closing so they can understand their mortgage terms and conditions.
“Don’t go getting the Rooms To Go or the Kane’s Furniture credit card in preparation for getting the house,” Vanzant said.
“Don’t put any large deposits in your bank. Don’t start moving money around.”
Finally, plan ahead if you know that family members will provide a financial gift to help with a down payment. Not only will a lender want proof that these funds came from a relative, but the lender will also want to know where the relative obtained the money.
“It feels intrusive, but what the lender inevitably is trying to make sure is that it’s not coming from the seller, or that that the money is actually coming from the right process in order for them to underwrite the loan the way they’re supposed to,” Vanzant said.
3. Talk with your agent about closing in the middle of the month
Knowing that the majority of loans close at the end of the month, some agents will pick an arbitrary day in the middle of the pack to avoid the bottleneck.
“You’re not getting priority because of how busy they [lenders] are at the end of the month. So we try to go for, say, the middle of the month,” Vanzant said.
Pushing back a closing date isn’t an enjoyable prospect, but it’s a more palatable alternative to scrapping a sale when both sides oppose starting the whole process from scratch. Be honest with your real estate agent about what hurdles you’re facing so they in turn can explain to the seller why waiting less than a month to close the deal is preferable to starting over with another buyer.
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